The Freelance Conundrum

It was big news, and Lauren Sharfman was determined to broadcast it as soon as possible. Ippolita, her New York City jewelry manufacturer, had just been named the official jewelry provider for the 2004 Emmy Awards, and Sharfman asked her web designer, a freelancer, to post the news immediately. When she checked her company's website, the release was up as promised. But Sharfman was shocked to see that the designer also had done some unsolicited tinkering with the site's homepage. "This was one of the biggest announcements we had ever had, and the designer didn't use our standard style sheet," she says. "It looked like an announcement from Sears."

Ahh, freelancers. They can be a pain to work with. But employers increasingly have little choice but to do so. According to the Bureau of Labor Statistics, more than 10% of the U.S. work force is self-employed. Add temps and part-timers, and the figure reaches nearly 30%. In fact, many economists say that one reason the current economic recovery has lagged in job creation is that employers are avoiding soaring workers' compensation and health insurance costs by keeping full-time staffs lean and using contractors instead. But managing an office of freelancers is not like running a traditional workplace. Even the most talented contractors bring baggage: confidentiality and security issues, conflict-of-interest concerns, training costs, and questions about quality and commitment.

Ippolita has 30 full-timers. But when things get busy, Sharfman brings in a small army of freelancers -- fashion experts, sculptors of miniature models, designers, and marketers. Episodes like the homepage snafu come with the territory -- and, Sharfman says, are generally balanced by the cost savings and added flexibility. Her biggest challenge is managing the relationships between freelancers and full-timers. "If you bring in a marketing consultant," she says, "it doesn't mean the marketing staff is doing a bad job." It helps to have written job descriptions -- for both staffers and contractors. "You have to make sure that everyone knows their specific assignment," Sharfman says.

But the challenges go far beyond the interpersonal into the legal realm. At ClassLink Technologies, a Weehawken, N.J., producer of educational software, all freelancers must sign a nondisclosure agreement stipulating that client lists, financial information, and software coding are proprietary and that violators will be subject to legal action. For ClassLink president Berj Akian, the NDA serves two purposes: "First, it's a legally binding document," he says. "Second, if a person hesitates, it's a red flag." And that's not the only way ClassLink screens contractors. Would-be software trainers must audition their presentation before an audience of ClassLink employees, and programmers are given two hours to solve a coding problem. More than half of potential contractors fail the test. Others, Akian says, "just get up and walk out and say, 'This job isn't for me."

But be warned: Spending too much energy managing your freelancers can spell trouble, says Mark Lubelsky, a New York City attorney who specializes in employment litigation. In the past, companies like Microsoft have lost legal decisions to temporary employees who claimed that they were de facto employees and as a result entitled to health and pension benefits. You can avoid a similar fate by making sure your freelancers retain a degree of, well, freedom. Remember, says Lubelsky: "If they're using employer-provided equipment, working at the employer's office, taking directions from a manager, and following the employer's schedule, the worker is an employee under the law."